Simon Property CEO: Malls Alive, Kicking

David Simon Admits Growth In US Limited

8:10 AM, May 3, 2012

Share Article

People have been hyping the death of the mall for the last two decades, but it's not happening anytime soon, said Simon Property Group CEO David Simon.

"Time Magazine 20 years ago had that exact headline," Simon, who has been at the helm of the world's largest mall operator since 1995, told CNNMoney at the Milken Institute Global Conference in Los Angeles. "If you look at our business and our profitability, it's never been better."

Investors appear to agree. Indianapolis-based Simon Property Group's shares are up 22 percent in 2012, compared to an 11.7 percent increase in the S&P 500. And online retailer Amazon.com, which has been fighting for consumers' wallets, is up nearly 33 percent.

Simon admits growth in the United States is limited, even going so far as to say some lower-end malls around the U.S. could close. Most of Simon Property Group's malls, like the Fashion Mall at Keystone in Indianapolis, serve higher-end consumers.

He thinks most of Simon Property Group's growth will come from driving sales into its existing malls by refurbishing them and adding new stores.

Simon points to Roosevelt Field mall on Long Island in New York as one example. After years of battling local community boards for approval, Simon Property Group recently landed luxury retailer Neiman Marcus as a tenant. Simon hopes such retailers will draw more high-spending customers into his malls.

For much of Simon's tenure, buying up competing real estate investment trusts, or REITs, has driven growth. He's spent roughly $27 billion in 17 years buying competitors, most recently paying $2 billion for a 29 percent stake in Europe's largest retailer Klepierre.

Simon says to expect fewer big acquisitions going forward, yet there is one new area where he'd consider buying: technology. Simon wants to make his mall more more technologically sophisticated, and he said that buying up a technology startup could help Simon Property compete more effectively with e-commerce sites

"Ideally what I'd love to do is know when our best customers are in the mall. If you show up I want to deliver a free latte to you (and) I know exactly what kind of latte you want," said Simon.

While aggressively courting new and existing consumers, Simon doesn't expect to fight battles with shareholders. Last year, Simon's board awarded him roughly $120 million after he agreed to stay at the company for the next eight years. That makes him one of the most highly paid CEOs in the United States.

Simon said he deserves it. "Nobody has had better performance over 10 years, and I expect that to continue," said Simon. "Our board took a serious look at what I contributed and the prospects for what it means to be part of the company for another eight years."

The REIT's returns have been exceptional. Since Simon joined as CEO in 1995, Simon Property has generated annual returns of 11.2 percent compared to roughly 6.7 percent for the S&P 500.